The 5-Step CEO Pay Scam

And how to reverse widening inequalities of income and wealth in America

Associated Press

Disney CEO Bob Iger makes over 1,000 times the median employee salary at his company. It would take the typical worker 158 years to catch up to what their CEO made in 2018 alone.

Average CEO pay at big corporations topped $14.5 million in 2018. That’s after an increase of $5.2 million per CEO over the past decade, while the average worker’s pay has increased just $7,858 over the decade.

Just to catch up to what their CEO made in 2018 alone, it would take the typical worker 158 years.

This explosion in CEO pay relative to the pay of average workers isn’t because CEOs have become so much more valuable than before. It’s not due to the so-called free market.

Second: They directed their companies to lobby Congress for giant corporate tax cuts and regulatory rollbacks.

Third: They used most of the savings from these tax cuts and rollbacks not to raise worker pay or to invest in the future, but to buy back the corporation’s outstanding shares of stock.

Fourth: This automatically drove up the price of the remaining shares of stock.

Fifth and finally: Since CEOs are paid mainly in shares of stock, CEO pay soared while typical workers were left in the dust.

How to stop this scandal? Five ways:

1. Ban stock buybacks. They were banned before 1982 when the Securities and Exchange Commission viewed them as vehicles for stock manipulation and fraud. Then Ronald Reagan’s SEC removed the restrictions. We should ban buybacks again.

2. Stop corporations from deducting executive pay in excess of $1 million from their taxable income—even if the pay is tied to so-called company performance. There’s no reason other taxpayers ought to be subsidizing humongous CEO pay.

3. Stop corporations from receiving any tax deduction for executive pay unless the percent raise received by top executives matches the percent raise received by average employees.